N.C. House Budget Plan Spends $600 M Less Than Perdue’s Plan; Includes No New Taxes

The North Carolina State House of Representatives released their budget proposal for the coming biennium earlier this week. With a notable change in leadership in the General Assembly, and a multi-billion dollar deficit facing the state, the House spending plan is sure to receive much scrutiny.

There are a number of notable differences between the House’s budget and Gov. Perdue’s budget plan, which was released in February. There will surely be some changes as the bill is debated in the coming days, but any such changes are likely to be minimal.

Following is an overview of the House budget proposal, including several relevant differences with Perdue’s budget.

Nearly $200 million of the House plan, however represents a transfer from the Highway Fund for the appropriation for the State Highway Patrol.

A total of $19.3 billion is nearly half a billion more than the 2007 fiscal year budget

The House plan’s spending total would mark a state spending increase of 33% from 10 years ago, and an 82% increase over the state’s budget of 15 years ago

No New Taxes, Tax Cut Package to Come

Unlike Perdue’s budget plan, the House budget proposal includes no tax increases

Purdue’s plan included an increase of the state sales tax of ¾ of a cent. Her tax is estimated to cost North Carolina taxpayers $826 million

The House also sets aside $230 million for a tax cut plan to be determined in the coming weeks

Lead budget writer Harold Brubaker (R-Randolph) revealed that $130 million of that reserve will be used to lower the state’s corporate tax rate. Similarly, Perdue’s plan included a reduction in the corporate tax rate from 6.9% to 4.9%

The other $100 million will be devoted to another tax cut or credit aimed at creating jobs, according to Brubaker

Fee Increases, Other Revenue Sources

The House budget plan includes more than $92 million in new fees and fee increases

The largest fee changes include:

An increase of the foreclosure fee from $150 to $300, estimated to raise $8.9 million in revenue

A new fee for improper equipment convictions, for a total of $12 million in revenue

New toll fees for coastal ferries, projected to raise $5 million in revenue

$67.5 million of tobacco settlement money intended for Golden LEAF in each of the next two years is diverted to the state’s General Fund budget. The amount represents the expected annual payment from the settlement, and does not touch Golden LEAF’s corpus of more than $630 million

$72 million of corporate tax revenue typically earmarked for the public school construction fund is diverted to the General Fund in the House plan

Another $16.6 million of tobacco settlement money is redirected to the General Fund. This is additional settlement payment funds normally intended for the Health & Wellness Trust Fund and the Tobacco Trust Fund. Both of these funds are targeted for elimination in the House plan, however. The rest of the funds normally directed to these funds are earmarked for cancer research, debt service and various health initiatives.

Other sources of revenue included in the House plan include:

$8.4 million from the Parks & Recreation fund

$8 million from the Recreation/National Heritage Trust Fund

State Employees

As in Perdue’s plan, state employees would receive no pay increase this year

An estimated 18,500 state positions would be eliminated in the House plan – compared to roughly 10,000 in Perdue’s plan

About 2,500 of the positions are in the executive, legal and judicial branches, with roughly half of those positions currently vacant

Another 2,300 of the positions are in the UNC system, with about half of those currently vacant

About 1,000 positions would be from the community college system

Most of the remaining position reductions would be K-3 teacher assistant positions (see more under “Public Education”). Some estimates peg the number of TA positions that would be eliminated at roughly 8,500, others as high as 11,000. It is unknown how many of the TA positions are currently vacant

Reduces by $42 million the allotment to Local Education Authorities (LEAs). The LEAs will have discretion as to how to absorb this reduction, are encouraged to minimize layoffs

Reduces by $255 million funding for teacher assistants in grades K-3, a reduction of less than half the total funding for K-3 teacher assistants. The funding change reflects savings if TAs in grades 2 and 3 were eliminated. But there still remains $272 million to fund TAs, and LEAs will be allowed to assign their TAs throughout grades K-3 as they see fit

Saves $13.3 million by eliminating the Dropout Prevention Grant Program

Reduces by $59 million (15%) funding for noninstructional support staff

Saves $10.8 million through a 10% reduction of central office staff in the LEAs

Reduces More at Four funding by $16 million – or 20%. The remaining $65 million in General Fund support for More at Four is transferred to DHHS’ Division of Childhood Development for a program within its childcare subsidy program

Reduces management funds in the Department of Public Instruction (DPI) by $6.4 million

Eliminates funding for the Teacher Academy – a nonprofit organization offering professional development. This produces savings of $4.7 million

Saves $469 million through a management flexibility reduction. The system is instructed not to institute across the board cuts to all institutions, rather to use some discretion

Reduces by 10% funds for the Legislative Tuition Grant program, which aids students attending private colleges. The reduction amounts to $5.8 million, leaving a $52 million appropriation remaining

Reduces the State Contractural Scholarship Fund by 10%. This fund provides aid to needy students attending UNC schools. The reduction amounts to $4.6 million, meaning there would still be $41 million appropriated for this program

Increases by $26 million the needs-based financial aid program. The increase is necessitated by a decrease in Escheat Fund monies available to help fund the program

Temporarily halts the state subsidy to UNC hospitals, for a savings of $44 million

Reduces funding for the Center for Public Television by $1.4 million, while the remaining $12 million in subsidy is provided on a non-recurring basis pending a legislative review

More at Four Consolidation: $65 million. More at Four is to be consolidated within the Division of Child Development and designated as a Pre-Kindergarten program. Parent fees, such as those that apply to Smart Start and childcare subsidy programs, are to apply to participants in the Pre-Kindergarten program. The $65 million is transferred from DPI, the current administrator of More at Four.

County Department of Social Services Administrative Reduction:$3.2 million. This administrative reduction reduces the support expenditures for county Departments of Social Services from 5 to 4 percent, leaving $16.4 million available for administration. This reduction is less than the Governor’s proposed reduction to 3 percent administrative costs. Curiously, Smart Start is still permitted to operate with 8 percent administrative overhead.

Lower Medicaid Provider Rates: $46.4 million. This provision reduces the reimbursement rates to healthcare providers from Medicaid participants by 2 percent, excepting rates paid to physicians and several other services. President Obama’s health care act eliminated the ability for states to adjust Medicaid eligibility, causing the burden for Medicaid cuts to fall on healthcare providers.

Eliminate Medicaid Inflationary Increases:$62.8 million. This provision prohibits increases in healthcare provider reimbursement rates for the biennium budget that would rise in the event of inflation.

Eliminate State Abortion Fund:$50K. This provision repeals the session laws associated with the state abortion fund, realizing $50,000 in savings.

Reduces funding for the grassroots science museums by 15%, for a savings of $511 k. There remains $2.9 million in spending for this program

Reduces by $2 million the state support for the aquariums, to be made up for with gate admissions. There still remains $7.5 million in state spending for the aquariums

Eliminates funding for the oyster sanctuary program, for $1.5 million in savings

Eliminates the shellfish mapping program, saving $562 k

Eliminates funding for the Tick Control Program $139 k

Eliminates funding for all non-match positions in the seven regional DENR offices, and reduces by 20% the General Fund support for these offices. Non-match positions are those not receiving any federal funds to match state support. These moves would generate $3.3 million in savings

Reduces from $100 million to $10 million the appropriation to the Clean Water Management Trust Fund. Gov. Perdue’s budget called for a $50 million appropriation

Increases spending for the One North Carolina Fund by $10 million – same as the Governor’s budget plan. The One North Carolina Fund is the governor’s discretionary corporate welfare fund

Eliminates the $732 k appropriation to the Wine and Grape Grower’s Council

Imposes a 15% reduction to the High Point Furniture Market, for a $121 k savings. There still remains a $685 k appropriation for the Market

Reduces the funding to the Biotechnology Center by 10%, or $1.9 million. There remains a $17.5 million appropriation

Reduces funding to the Rural Economic Development Center by 10%, or $2.3 million. This still leaves $20.4 million being allocated to the Rural Center

Closes four minimum custody prisons: Bladen, Cabarrus, Durham and Haywood for $5.4 million in savings

Moves the State Highway Patrol from the Highway Fund to Crime Control and Public Safety for budgetary purposes. The $193 million appropriation for the SHP would be transferred from the Highway Fund to Crime Control and Public Safety

Reader Interactions

Discussion

I did not see any reduction in Smart Start or More at Four Administrative salaries. Does this budget reduce administrative salaries? They appeard in Civitas Capitol Connection and I thought they were outragous. Please let me know.

Trackbacks

[…] What did the Civitas Institute have to say about the budget? Your blogger looks to the Civitas Institute to provide the most in-depth analysis anywhere, and as usual, writer Brian Balfour delivers. Read his analysis below or go to the website here. […]

[…] in our children.What is the pretext for Nichol’s description of this coming apocolypse? The N.C. House budget proposal that would only increase state spending by 82% over the last 15 years. And this doesn’t even […]

[…] from the last session and contrary to what the media wants the public to believe. In 2011, the House proposed a budget that was $600 million less than former Governor Perdue’s budget. Perdue and the House looked at things very differently, […]

Civitas encourages you to leave your comments and feedback related to the articles posted here. Civitas reserves the right, in its sole and absolute discretion, to remove any comments, including but not limited to comments that include abusive, vulgar, threatening or harassing language, or personal attacks of any kind. Off-topic comments or gratuitous links that could be viewed as spam are also subject to removal at our sole discretion. Your email address will not be published. Required fields are marked *

Comment

Name *

Email *

Website

Save my name, email, and website in this browser for the next time I comment.